What Were the Effects of Mercantilism?

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Mercantilism had an effect in many areas, including politics, economics and culture. Some of the major impacts included the expansion of colonies overseas, increased government regulation of trade and the promotion of manufacturing. Many of these effects still influence global trade and politics in modern society.

Noted capitalist Adam Smith described a mercantile system as a political economy that favored the host country by encouraging the exportation of goods and limiting imports. Historically, this was a significant instance of the government influencing the economy. One method for this was placing higher tariffs on imports, encouraging consumers to buy goods made within the country. This policy is still practiced in the modern era.

During the rise of mercantilism, competing European governments became more involved with industry. To encourage development, governments would make capital injections to create new markets. In some cases, the government would take control of an industry and institute a monopoly.

The cultural effects of mercantilism included the rise of the merchant class, which carried more power than traditional lower classes. Another major effect was the transfer of culture through colonial expansion. While the main goal of colonial expansion was to acquire gold and other precious materials, this led to an expansion of European culture around the world.